Nokia Corporation (ADR) (NOK) Plans Job Cuts, BMO Ups EPS Estimate

Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) has concluded the acquisition of Siemens’ share in Nokia-Siemens network, which will now be called as Nokia Solutions and Networks. Nokia has paid EUR1.7 billion (USD 2.26 billion) out of which EUR 1.2 billion is in cash and a one year EURO 0.5 billion loan from Siemens.

Analysts Tim Long and Ari Klein of BMO Capital Markets have raised the EPS estimate to reflect the ceased payments back to Siemens. The declining cash position of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is a concern for analysts and there can be certain cash issues this year or in the starting of next year. And the analysts also noted that there will be some hurdles in both feature phones and Smartphones.

For 2013/2014 EPS is estimated to be EUR 0.01/0.08 from EUR (0.02)/0.03 respectively. BMO Capital Markets have an ‘Underperfrom’ rating on the stock with a price target of $3.

It is expected that Nokia Solutions and Networks will reduce headcount by 8,500 in order to enhance profitability, says a report from Bloomberg. By 2014, the workforce is expected to be at 42,000, or a reduction of 17 percent. Nokia is looking to achieve this goal by selling or shutting down plants and slowing down manufacturing. By the end of June, there were around 50,500 workers in Nokia Siemens.

Over the past two years, there has been around 20,000 layoffs in Nokia Siemens through which it has achieved profitability at a time when sales were poor. If Nokia plans to further contain its cost by any measure then it will have an edge over market leader Ericsson AB (ERICB) and Chinese makers.

“It’s good to be focused where you’re strong and to build scale around that dimension,” Nokia Siemens Chief Executive Officer Rajeev Suri told after Nokia completed acquisition of Siemens AG share. He added that, “We’re the only ones playing that game.”

After the acquisition, the finnish handset maker will be able to use all of the cash from the equipment business. Additionally, it is looking to sell a 500 million euro bond to help fund a dividend payment to Nokia of around 900 million euros. According to CEO Stephen Elop, Nokia will not integrate Nokia Siemens.

However, Suri did not comment anything on job cut plans, unlike Brett young who is the spokesman for Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V). Apart from Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V), there are other European companies who resorted to job cuts in the recent months like ThyssenKrupp AG (ETR:TKA), Germany, which is largest steelmaker, which decided to slash 3,000 positions after suffering a net loss. AstraZeneca Plc (ADR) (NYSE:AZN), pharmaceutical cut 2,300 sales and administrative jobs in order to retain profit.